The Hub Power Company Limited (HUBC) announced its 2QFY23 financial result where the company posted a profit after tax (PAT) of PKR 13.3bn (EPS: PKR 10.25), up by 177% YoY compared to PKR 4.8bn (EPS: PKR 3.70) during 2QFY22. This took the 1HFY23 earnings to PKR 22.4bn (EPS: PKR 17.27), up by 83% YoY. The rise in earnings is majorly due to 15.7x YoY increase in share of profit form associates and joint venture and 89% rise in other income. However, finance cost also increased by 110% to PKR 7.1bn.

Along with the result, the company also announced a cash dividend of PKR 5.75/share, taking the period end payout to PKR 21.25/share.

Result Highlights

During 2QFY23, net sales witnessed an increase of 26% YoY to PKR 25.1bn due to higher dispatches (up by 30% YoY to 646 GWh due to addition of Thar Energy Limited), and augmented furnace oil prices. On a QoQ basis, sales declined by 15%. During 1HFY23, sales also increased by 18% YoY to PKR 54.7bn, led by higher FO prices, however dispatches went down by 7% YoY.

During 2QFY23, gross margins of the company increased by 11pps YoY to 51%. The rise in margins was mainly attributable to lower load factor (Hub base plant) during the quarter, we view.

Other income increased by 87% YoY to PKR 495mn during 2QFY23 given higher income from management services, we view.

The company recognized share of profit from associate and joint venture of PKR 9,986mn during 2QFY23 compared to loss of PKR 1,462mn during 2QFY22. This was owed to reversal of impairment loss which CPHGC booked during 2QFY22 and PKR depreciation, we view.

Finance cost during 2QFY23 increased by 176% YoY | 105% QoQ to PKR 4,788 due to higher interest rates and addition of TEL finance cost, we view.

Recommendation

Currently we have BUY call on the scrip with Dec’23 target price of PKR 119.7/share.

Courtesy – AHL Research